Why are too few houses are being built?

Liam Halligan looks at how developers deliberately hold back land to maximise profits and asks if radical reform is the only solution to Britain’s housing crisis Britain’s

Big house-builders are a powerful lobby

Back in the 1980s, the last time the UK built 250,000 houses in a year, small and medium-sized builders built more than two thirds of new builds but they now build less than quarter of new homes.

Meanwhile the big housebuilders continue to make big profits.

Persimmon £638m annual profits, up 34%

Taylor Wimpey £604m annual profits, up 34%

Barratt Homes £682m annual profits, up 45%

Since the 1960’s, UK housebuilding has fallen short of the 250k new homes needed each year to meet the natural growth of population and changes in household formation.

During the Thatcher years, fewer council houses were built, and house building has been in serious decline ever since, falling under every prime minister from John Major onwards, to just 133k new homes built across the UK in 2013, the lowest peacetime total since the 1926 general strike. The latest data shows annual house building on the rise at least. But at 152k, it is still very low by historic standards and way short of the demand for homes.

Housing minister Gavin Barwell says the Government is committed to finding ways to boost self build homes to more than 20,000 a year. However doubling the number of self-builds will not the meet the need.

Breaking the housebuilding log-jam

Sajid Javid, MP for Bromsgrove (the home of Buildingtalk) and Secretary of State for Communities & Local Government, has pledged to break the housebuilding logjam.

He says: “Our housing shortage is a very, very serious problem. The big developers must release their stranglehold on supply. It’s time to stop sitting on land banks and stop delaying build-out”.

No chance of meeting house build targets

A year ago ministers publicly set a target that a million new homes would be built in the UK by 2020 — meaning 200,000 a year, compared with well below 150,000 now. It’s never going to happen.

Turning houses into gold

On tonight’s C4 programme, Professor Paul Cheshire, a housing expert at the London School of Economics and adviser to successive governments, explains why there is no chance of the Government achieving its target unless there is radical reform.

Professor Paul Cheshire, a housing expert at the London School of Economics: “Turning houses into gold: the failure of British planning”

Paul explains that in the past 20 years, Britain has built around 2.3m too few homes.

He wrote in 2014 about “Turning houses into gold: the failure of British planning” explaining why Britain’s crisis of housing affordability is nothing to do with foreign speculators but the result of decades of planning policies that constrain the supply of houses and land and turn them into something like gold.

The C4 documentary challenges UK’s house-building industry and explain why radical reforms are the only solution to the housing crisis – watch it via this link.

Oxford – most unaffordable city – land is being hoarded says Ed Turner, Oxford Councillor and a housing spokesperson for the Local Government Association. Developers “making a fast buck”.

Big developers have made serious money –

Persimmon profits up from £638 MILLION – up 34% on the previous year.Taylor Wimpey £604m – also up 34%Barratt Homes – £682m – up 45%

(these 3 builders provide a quarter of all new homes, the eight next largest more than a half, small builders around a quarter). In the 1980’s small builders built two-thirds of homes each year.

Community Secretary Javid talks the talk but isn’t walking the walk – said he wants to “break the stranglehold of developers”.

Home Builders Association – weasel words – 30% more new homes in last 2 years, industry not sitting on land banks – no reason why they would delay. Nothing their fault.

Reporter puzzled by that statement – it includes existing houses turned into multiple flats and shops converted to housing. Official government data shows in 2013 133,000 new homes built – lowest figures in over half a century. 2015 – 152,000 new homes – up only 14% over 2 years NOT 30% and from a very low base. Over this summer housebuilding actually fell.

Javid “determined to do something about it”!

Small builders feel shut out – no land particularly in London, only small sites available. Developers have too cosy a relationship with councils says one small builder. Public sector land is not being released to small builders.

Last year the Big 3 house builders completed 44,360 homes and had planning permission to build a further 200,823 homes. They have strategic land holdings that could accommodate a further 278,600 more homes.

“Option agreements” are common – paying landowners if planning permission is granted – but only they can buy the land – no-one else.

A farmer near Gatwick told his story – first approach “a chat” to sell an option for exclusive development. They offered £275m which the farmer rejected, saying the developer already has land nearby they can develop. But options are not always recorded by the Land Registry so it is hard to know who controls such land.

So what is Javid going to DO, asked the reporter – a White Paper next month – we can’t have a market dominated by big suppliers, more small developers needed. But no idea how he is going to do it!

Reporter pointed out that the big house builders are major donors to the Tory party.

The big house builders are not impressed by talks of fines for not starting new builds more quickly. The bloke from their association said that if you start restricting the house building industry they will react by reducing output. The reporter asked if that was a threat – the spokesperson denied that. He said that, if the big builders had to forfeit land with planning permission but not started, house builders will restrict the flow of planning applications.

Land banking taxes may be needed says reporter, as the system is broken.

Yes, this is what groups across the country have been saying for some time. But neither the reporter nor Mr Javid twigged how slow build-outs allow developers to get more permissions because of the “catch-22” of the 5-year land supply. No mention of infrastructure either…

As Michael has pointed out the 5yr land supply is important, but of course this is made an issue by the NPPF.

It is the NPPF which allows developers to play the system – to restrict the level of building, thus force the LPA to not be meeting its 5yr land supply targets, whence the NPPF then effectively invalidates the Local Plan and allows PP to be forced through on sites which are not in the Local Plan and which are unsuitable.

This may of course have been an intentional side-effect of the NPPF – after all the government did, somewhat naively, outsource the development of planning policy and the NPPF to a bunch of developers. And developers being clever, canny, cunning, dodgy, duplicitous and devilish types, who already employ teams of people to find loopholes in planning laws, it wouldn’t surprise me if they were able to foresee this outcome.

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